Sino Grandness

Sino Grandness: Thoresen Thai Agencies and PM Group, both belonging to the Mahagitsiri family in Thailand became Sino Grandness’s strategic investors via a private placement of 86m new shares, raising Rmb185m ($37m). The placement price of $0.61/share is about 9% discount to the last closing price. Placement, TTA and PM will in aggregate control 13% of Sino Grandness. The new capital can ease Sino Grandness’ short term liquidity pressure, which partly arises from potential CB redemption this month. Nevertheless, it is still too early to confirm the long term synergy brought by the new investors. PM Group is a big conglomerage in Thailand, and owns its own F&B business, whilst also being the manufacturer and distributor of Nescafe in Thailand. However, PM Group uses TTA, which is a shipping company but trying to diversify into other sectors such as F&B, as the main platform, and this may not be the best structure for Sino Grandness. Also, issuing shares at 4.4x P/E is costly for shareholders. Factoring the placement, Maybank-KE adjusts TP is to $0.73 from $0.76. Hold rating maintained. Sino Grandness is currently trading at 5.1x FY14e P/E.